BEIJING - China boosted spending on research and development by a quarter last year as part of a national campaign to foster innovation, but the government says Chinese industry still lags global rivals.

Spending on scientific and technological development by companies, institutes and universities reached 245.0 billion yuan (US$30.85 billion), with over two-thirds spent by business, the National Bureau of Statistics and Ministry of Science and Technology said in a report released on Friday.

The Chinese government has embraced manned space exploration as a symbol of the country's rising technological might and pushed a campaign to promote "domestic innovation" and reduce the country's dependence on foreign patents.

Indeed, company spending on R&D grew 27.4 percent in 2005 to 167.4 billion yuan ($21.08 billion). But the official report said healthy R&D growth hid poor performance by Chinese firms.

"In some high-tech industries, our country's R&D spending is strikingly behind their international peers'," said the report, which appeared in the China Information News.

In the pharmaceutical sector, multinationals spend 10 to 15 percent of their budgets on research, compared with Chinese medicine companies' average 1.5 percent, the report said.

"Our gap with advanced countries is extra-ordinary. If we're to raise competitiveness, it would be foolhardy not to be anxious to catch up."

In 2005, China devoted 1.34 percent of its gross domestic product to science and technology research -- high for a developing country, but still far behind the developed countries that China aspires to join. The United States spends about 2.5 percent of its much larger GDP in research and development, the report said.

A national plan for science and technology released in July called for R&D spending to reach 2 percent of GDP by 2010. This target "may again fall short," the report said.

($1=7.9425 yuan)